"I want to buy two houses but can only qualify for one. My mortgage
broker said that if both loans closed on the same day, the debt from one
would not be counted in the expense-to-income ratio of the other. That
way, I would be able to finance both houses. The broker would arrange
both loans. I don't feel comfortable with this process – would I be
breaking the law? What are the chances I would be found out?"

The application for whichever loan closed second would contain false
information because it would not reveal the loan that closed first. I’m
not a lawyer, but that smacks of fraud.

The chances of being caught are pretty high. Usually, about every tenth
loan goes through a post-closing audit. If either of your loans was
selected, you would be found out.

You would also be caught if both loans ended up being serviced by the
same entity. Since servicing is becoming increasingly concentrated in
the hands of a few large players, the chances of that happening are not
insignificant.

If you survive these hazards but later on have serious payment problems
on one or both of the loans, they will find you out at that point. Don’t
expect any sympathy – lenders don’t offer workout plans to borrowers who
deceived them.

I find it incredible that a mortgage broker would propose this to you,
since he would lose his license if it came out. The great majority of
brokers are not that foolish.

That’s why most borrowers who want to pull this stunt engineer it
themselves using two brokers, neither of whom is aware of the other.
This increases the risk even more, since the two brokers might send the
loans to the same lender. (Your broker would certainly send the loans to
different lenders). I heard recently of a case in which this happened.
Naturally, the lender rejected both loans.

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